The paper investigates the main drivers of real Gross Domestic Product growth in Kenya as well as those that drive the foreign direct investment (FDI) in Kenya. It is widely acknowledged that FDI has potential benefits that accrue to host countries. The view suggests that FDI is important for economic growth as it provides much needed capital, increases competition in host countries and helps local firms to become more productive by adopting more efficient technology. Kenya’s record in attracting FDI
from the 1980s has been poor though it was a favoured destination in the 1970s.The study findings show that FDIs in Kenya are mainly market-seeking and these require growing GDPs, political stability and good infrastructure, market size as well as reduction in corruption levels. The prevalence of crime and insecurity would be impediments to FDI inflow. The policy implications of this study are that Kenya’s FDI’s tend to be mainly market seeking and for this reason policy makers in Kenya should focus on improving political stability, emphasize the development of good infrastructure and growing the country’s GDP. This should be coupled with a serious attempt at reducing corruption levels as well as a serious assault on the prevalence of crime and insecurity which are major impediments to this type of FDI inflows.
Keywords: Foreign Direct Investment, Economic Growth, Determinants, Kenya

This paper uses firm level survey panel data to estimate parameters of export propensity and intensity in Kenyan manufacturing. The effects of unobservable factors that would otherwise bias the estimated parameters are removed using a control function regression procedure. The key finding of the study is that export propensity and intensity are strongly responsive to total factor productivity. In particularly a 10% increase in total factor productivity increases export propensity by 54%, but export intensity rises less steeply by 18%. We also find that ownership structure of the firm and unobserved factors specific to firms strongly influence exports. Taken together, the estimation results provide insights into the policies
needed to promote entry and stay of firms in export markets. The findings suggest that policy measures to improve export performance of Kenyan firms should focus on improving total factor productivity, encouraging foreign direct investment and stimulating modernization of manufacturing capital.

This paper examines the determinants of Kenya’s exports to the EU since 1960 to 2010 . The study uses ordinary least squares and two stage least square regression using exports values as the dependent variable. The independent variables are foreign aid, real gross fixed capital formation, terms of trade and consumption which is used as an instrument for real gross domestic product in the two stage least square as well as a dummy variable capturing the effect of reciprocity as a proxy for assessing the effect of the trade relation. The results show that during periods when there was reciprocity, Kenyan export values were stagnant and low, unlike periods when ACP states were given preferential treatment i.e. when there was no reciprocity. It is therefore evident that the proposed EPAs may worsen the current situation for Kenya’s exports.
Key Words: Kenya, ACP-EU, Exports, determinants, EPAs